On May 18, 2016 the US Department of Labor released its new rules on the salary threshold for overtime pay. DEMA is disappointed with the new rules which have been established without congressional vote and which more than double the salary threshold below which workers will be eligible for overtime from its current $455 per week ($23,660 per year) to $913 per week ($47,476 per year). The rule goes into effect on December 1.

Additionally, the final rule includes a mechanism for automatically updating the salary threshold every three years (a change from the proposal of yearly adjustments). The next automatic update to the salary threshold would be on Jan. 1, 2020, and the new salary level will be announced 150 days before it takes effect. The minimum salary level is set based on the 40th percentile of wages of full-time salaried employees in the lowest wage Census region (currently, the South).

Importantly, the Labor Department decided not to make changes to the “duties test,” part of the three-pronged test for establishing exemption from overtime eligibility. In a draft rule released last year, DOL hinted that it might limit the definition of “primary duty” to duties on which an exempt employee spends 50% or more of his or her working hours. In many situations, that would have meant that employers would need to track the hours and tasks of exempt employees to ensure that they had accurately identified the employee’s primary duty. So with no changes to the duties test, the basic test for determining who in your organization remains exempt from overtime eligibility under the executive, administrative, or professional exemptions is as follows:

The employee must make over the new salary threshold of $47,476;

The employee must be salaried;

The employee must perform exempt duties (executive, administrative, or professional).

While DEMA supports the principle of modernizing and streamlining the Fair Labor Standards Act, including the overtime rules, DEMA’s written public comments, filed last September, expressed our concerns that this rule, as proposed (and as now enacted), contains a threshold which is too high and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences or keyed to the Consumer Price Index. Such a dramatic increase will create the necessity for many workers in every sector of the diving industry to be re-classified as hourly, increasing costs with the result being that it will be difficult to allow these individuals to attend educational and technical conferences which are critical to maintaining their expertise and their positions with an employer. DEMA’s comments also pointed out that these rules may cause employers to consider reducing their work forces, and they do nothing to help employers and employees account for the way people work today; the rules actually discourage the concept of working remotely; they favor elimination of mid-level management and entry-level administrative positions, and they make it more difficult for lower-level employees to climb the professional employment ladder. The rules attempt to create a one-size-fits-all framework in a modern work environment that otherwise rewards flexibility.

Earlier this year, before the announcement of the final version of these rules by the Department of Labor, DEMA approached members of Congress and asked for their support in delaying or overturning the plan. Now that the rules have been announced they are subject to a 60-legislative day provision in the Congressional Review Act, permitting 60 legislative days for the Congress to vote to overturn the rule with a simple majority.

If you are concerned about the impact of the overtime rule on your company, we strongly urge you to contact your elected representatives in Congress and share how this change will affect your company’s bottom line.

Your message to your Representative and Senator should be personalized and we encourage you to add details about the work of your organization and how the final rule would impact your company. The following text may help guide you:

DEMA continues to believe that the salary threshold is set too high, and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences. The final rule includes a 100 percent increase to the minimum salary threshold. This is likely to disproportionately impact small businesses in the diving industry and their employees, especially those in low cost-of-living areas.

DEMA will continue to work toward a legislative solution to keep DOL’s overtime rule from taking effect in December, and will continue to share updates on this important issue as they become available. If you have questions about this issue, please email DEMA at publicpolicy@dema.org or contact us at 858-616-6408.